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Editorial

License to plunder

Special taxation zones invite abuse and should be reined in

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Sunday March 16, 2014 6:49 AM

When state Rep. Kirk Schuring, R-Canton, sponsored legislation creating joint economic
development districts in 1995, he helped bring about a tool for cities and townships to work
together to spur job-producing development on underdeveloped land.

Schuring didn’t have anything to do with a provision in a 1996 law that sounds similar, but
created an opportunity for townships and cities to conspire in outrageous tax grabs with no
economic-development benefit to the public. But he’s determined to undo the damage. The
Schuring-sponsored House Bill 289 passed the House of Representatives overwhelmingly and is now in
the Senate. It deserves swift passage, before any more mischief ensues.

In the joint economic development districts Schuring helped create, if voters approve, an area
is defined in the township, and the participating city’s income tax is collected in that area, with
the proceeds going to public improvements that encourage economic development. Typically, the city
receives a cut of the income taxes collected by the township.

That concept was warped when a 1996 law dealing primarily with redevelopment of polluted sites
was amended to include the creation of joint economic development zones. The law loosened the rules
on the joint districts, to allow townships to pair up with cities far from their borders. That
alone throws into question how meaningful the zone can be for encouraging joint economic
development. But, far worse, the law allows the creators to cherry-pick specific township
properties to be subject to the income tax, and doesn’t require proof that any of the tax revenue
will go to encouraging economic development.

The result is a highly undemocratic tax grab. A board of township trustees, which otherwise has
no authority in Ohio law to impose an income tax, targets employee-rich businesses or organizations
and asks everyone else if they’d like those targeted workers, and only those targeted workers, to
pay income tax to the township.

One development-zone proposal last year, which was shelved because of a technical error, would
have imposed Bexley’s 2.5 percent income tax in Liberty Township, 24 miles away. Trustees targeted
the salaries of employees of the Columbus Zoo and Aquarium and Olentangy Local Schools.

Schuring’s justifiable fear is that such issues, when they make it to the ballot, tend to be
approved, because most voters wouldn’t be subject to the tax, but would benefit from it. Zones have
been approved between Clinton Township and Grandview Heights, Blendon Township and Westerville, and
in Prairie Township with both Columbus and Obetz. Cities have an incentive to participate in such
tax-grabs. It’s easy to imagine a cash-strapped city cutting such deals with townships all over the
state.

Ohio law prohibits townships from imposing income taxes for a reason: Township government is
designed for rural and lightly populated areas. If an area is urbanized and developed enough to
need income-tax revenue, it should be subject to the greater tools and controls inherent in
municipal government.

Ohio already is burdened by too many local governments and too many taxing jurisdictions, whose
differing rules are a nightmare for companies doing business in multiple locations. Add to this the
threat of unanticipated predatory taxation and the problem grows worse.